10. STOCKHOLDERS’ EQUITY

Dividends

Dividend charges recorded during the three and nine months ended September 30, 2017 and 2016 are as follows:

Accrued dividends payable at September 30, 2017 and December 31, 2016 are comprised of the following:

Warrants and Derivative Warrant Liability

The Company accounts for common stock warrants as either equity instruments or derivative liabilities depending on the specific terms of the warrant agreement. Stock warrants are accounted for as derivative liabilities if the warrants allow for cash settlement or provide for modification of the warrant exercise price in the event subsequent sales of common stock by the Company are at a lower price per share than the then-current warrant exercise price. The Company classifies derivative warrant liabilities on the balance sheet at fair value, and changes in fair value during the periods presented in the statement of operations, which is revalued at each balance sheet date subsequent to the initial issuance of the stock warrant. As of September 30, 2017, the following warrants were outstanding:

A summary of the warrant activity during the nine months ended September 30, 2017 is presented below:

The Company has assessed its outstanding equity-linked financial instruments issued with the term loans discussed in Note 7 and has concluded that the warrants are subject to derivative accounting as a result of certain anti-dilution provisions contained in the warrants. The fair value of these warrants at issuance are classified as a loan fee and are being amortized over the life of the loan. The fair value of these warrants is classified as a liability in the financial statements, with the change in fair value during the future periods being recorded in the statement of operations.

The following table summarizes the calculated aggregate fair values for the warrant derivative liabilities using the Lattice Model method based on the following assumptions:

These warrants are Level 3 valuation which were issued and measured on September 30, 2017.

The following table summarizes the change in fair value of the warrants from December 31, 2016 through September 30, 2017.

Subscription Receivable

During the nine months ended September 30, 2017 the Company issued 160,680 shares of common stock that were subject to certain vesting requirements, with a fair value of $3,841. As of December 31, 2016, shares that were previously issued to employees with a fair value of $2,829 remained unvested. Because these common shares are subject to forfeiture if the employees are no longer employed with the company at the end of their employment agreements, their unvested value is carried in subscriptions receivable within stockholders’ equity. During the nine months ended, $1,670 of such amount vested and was reflected as stock compensation and $3,588 remained unvested as of September 30, 2017.

Equity Transactions (in whole dollars)

During the nine months ended September 30, 2017, the Company issued 9,181 shares of its common stock with a fair value of $125,000 for settlement of legal matters.

During the nine months ended September 30, 2017, the Company issued 221,511 shares of its common stock to individual investors, which resulted in net proceeds to the Company of $2,712,000.

During the nine months ended September 30, 2017, the Company issued 103,782 shares of its common stock with a fair value of $1,568,000 pursuant to consulting agreements.

During the nine months ended September 30, 2017, the Company issued 164,609 shares of its common stock with a fair value of $3,841,000 to employees under employment agreement for future services.

During the nine months ended September 30, 2017, the Company issued 256,801 shares of its common stock with a fair value of $5,650,000 to its senior lender in conjunction with the refinancing of the senior debt on April 20, 2017 in conjunction with the Benchmark acquisition.

During the nine months ended September 30, 2017, the Company reclassified 444,275 shares of its common stock with a fair value of $437,000 to its senior lender that from temporary equity to permanent equity which is now included in the consolidated statement of changes in stockholders’ equity. Reclassification was due to the put provision from the Lateral senior credit agreement dated October 28, 2015 was removed when the agreement was amended for the Benchmark acquisition on April 20, 2017.

During the nine months ended September 30, 2017, the Company issued 29,399 shares of its common stock with a fair value of $444,000 to settle debt having an approximate value.

During the nine months ended September 30, 2017, the Company issued 5,360 shares of its common stock with a fair value of $125,000 to investor relation firm for services.

During the nine months ended September 30, 2017, the Company issued 5,300 shares of its common stock with a fair value of $62,000 to members of the Board of Directors.

On April 21, 2017, the Company issued 1,069,538 shares of its common stock with a fair value of $21,658,000 to certain Benchmark shareholders in conjunction with the acquisition of Benchmark.